So far, most of the coverage of the Securities and Exchange Commission’s civil fraud suit against Goldman Sachs and one of its bankers has focused on what the case will mean for the bank, and for Wall Street. But the success of the SEC’s most important market crisis case is also of vital importance to the agency and its top cop, Robert Khuzami. Given the depth of the SEC’s problems — just this week, its own inspector general ripped the agency’s bungled oversight of Stanford Financial, and the Lehman bankruptcy examiner blamed it for failing to prevent the accounting practices that allowed Lehman to disguise its weakness from investors — the Goldman suit is the regulatory equivalent of a bet-the-company case for the SEC and its enforcement director.
Khuzami, a former Manhattan assistant U.S. attorney, was brought in a little more than a year ago by SEC Chair Mary Schapiro to lend prosecutorial muscle to an enforcement division that has seemed defined, in the past few years, by its labyrinthine bureaucracy. According to a recent profile of Khuzami by Recorder affiliate The American Lawyer, he spent much of his first year on the job streamlining that bureaucracy and instituting reforms meant to encourage cooperating witnesses.
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